Live: Tuesday, May 22, 2018

3:15 p.m. New York time

No trades today.

SPY moved down during the day. The need for a recount of the Elliott wave analysis still stands, however, and I’m still figuring out how best to read the chart.

Big picture: The S&P 500 and other broad stock indexes made a high-level peak on Jan. 26. It is a downward wave, in my opinion a 1st wave of the primary degree.

Therefore, my major presumption remains bearish within that wave.

All of the Sturm und Drang since has been a working out of the details — the waves of lesser degree — within that bearish move.

Of course, for shorter-term traders like me, the devil is in the details, and those waves of lesser degree can burn up my profits very quickly. So I shall be obsessing over the new count until I’ve figured out an answer.

10:40 a.m. New York time

At this morning’s open SPY exceeded it’s May 14 peak, which I have labelled, using Elliott wave analysis, as the start of Minute wave 1 to the downside. Today’s opening breaks an iron-clad rule of Elliott wave doctrine, which is that a 2nd wave can never move beyond the beginning of the preceding 1st wave of the same degree.

Long story short, it’s back to the drawing board.

Events like this illustrate my contention that Elliott wave analysis is as much an art as a science. The patterns and the rules hold true, but their significance unfolds over time. Any count is the best intuitive based on the information available at the moment, but that intuition can be invalidated by ensuing events. That’s what happened this morning.

The Fisher Transform continues to show uptrending on the daily chart and downtrending on the monthly chart. Absent an agreement between the two, I am biding my time.

I plan no action at this point on my SPY options (here and here) and shares in the inverse S&P 500 fund SPXU.

By Tim Bovee, Portland, Oregon, May 22, 2018

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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